The Supreme Court decision in the case ‘The Revenue Commissioners v Karshan (Midlands) Ltd. t/a Domino’s Pizza’ set out new guidelines for determining whether a relationship was that of an employee or self-employed contractor.
Revenue Guidance now requires businesses to review their contractor agreements and assess whether they may actually be employees. This is not really new, as the obligation always existed.
However, you may be aware that there is a window of opportunity before 31/1/2026 to make a disclosure to Revenue for the years 2024 and 2025. The advantage of this is that:
- The disclosure will be treated as a technical adjustment, with no penalties
Revenue will accept liabilities calculated as follows:
- Income Tax calculated at the rate of 20% on the gross1 amount paid to the employee during the relevant year. This avoids having to “gross-up”
- USC calculated based on a blended rate of 3.5% of the gross amount paid during the relevant year
- PRSI (Employee and Employer contribution) must be calculated on an actual basis and records updated
- Failure to disclose by 31/1/2026 brings any default back into the normal penalty regime
